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March 19, 2013

So what did Heseltine say?

I’ve been
reflecting on the Government’s response to Heseltine
overnight. While most commentators have reacted in a broadly positive way, as
always, much depends on how policies are implemented and whether the rhetoric
about the Government’s commitment to devolve is supported by day-to-day
decision-making.

Key points worth
noting:

Creation of Single
Local Growth Fund: The details of what will be in the Fund are still being
negotiated as part of the Spending Review, and we would expect this to be
smaller than Lord Heseltine’s recommendation of £49bn. It is good news that
transport, housing and elements of skills funding (though not yet
apprenticeships) will be in the Fund, and it could be good news that they’ll be
looking for “alignment” with other skills and employment programmes as well as
EU Structural and Investment Funds, although ‘alignment’ is one of those words
that can cover a multitude of policy responses...It will be important, however,
that the perfectly sensible criteria for which monies to include in the Fund
(on p.42) are not applied in such a way that, where evidence is limited as to
what works best at national / local level, the default is to keep everything
national.

Competition: There
will be an element of competition, but perhaps not quite what Lord Heseltine
envisaged. The response says that the Single Local Growth Fund will be
allocated “through a process of negotiation and using competitive tension to
strengthen incentives on LEPs and their partners to generate growth”. This
means that every LEP will get something but the exact offer will depend on
individual plans. A process similar to the Wave 2 City Deals approach may be
used to strengthen the quality of multi-year strategic plans and bids to the
Fund, with more available to those that “put forward robust and ambitious means
of delivering economic growth plans”, demonstrate greater innovation, stronger
capacity and stronger governance across the LEP area.

Capacity and
Local Enterprise Partnerships: An approach based on competition raises
questions, as always, about the places that have less effective LEPs and
partnerships; the variability of LEPs around the UK is well documented. The
response is clear that LEPs will be the main bodies through which funding is
channelled, as for the Growing Places Fund, but that LEPs should remain “small,
responsive, business-led organisations and avoid becoming local bureaucracies”.
LEPs will get an additional £10m a year to boost their capacity and support
development of strategic multi-year plans for local growth, and there will
potentially be some support from Local Growth teams, but more detail is needed
on whether government will provide different types of support to LEPs that are
less developed, particularly in economic areas that are either particularly
vulnerable or have particularly high growth potential.

Governance: It’s
clear that the Government is pushing hard for local areas to improve their
governance. Government has said it will support local authorities to form
combined authorities or other forms of collaboration through a £9.2m
Transformation Challenge Award, will not prevent areas pursuing unitary status,
and will seek legislation for directly elected mayors for combined authorities
where this is wanted by local areas. This is all very good news, particularly
‘conurbation mayors’ – the Centre has been calling for this since 2006,
although we would want to see clear powers and funding attached to a directly
elected mayor, to avoid the problems that the referenda last year ran into.

Getting
Whitehall thinking locally: It is good that Local Growth teams are going to
be established and that every LEP will have a senior Whitehall sponsor to work
with them to understand their priorities and introduce more place-based
thinking into Whitehall policy. However, to achieve the kind of transformation
in policy making required to ensure that every national economic growth policy
at least considers place when it is developed, this will need to go beyond
senior sponsors having greater familiarity with one place. Instead the senior
sponsors will need to challenge policies not just as champions for their LEPs,
but on the basis that national policies work best if they are able to adapt to
local circumstances.

Infrastructure
and borrowing: It’s interesting that a new, concessionary Public Works Loan
Board Rate will be available to an infrastructure project nominated by each LEP
(except London), with the total borrowing capped at £1.5bn – and will be a good
test of LEPs for them to have to put forward just one project to be considered.
But will £1.5bn be enough – and will sharing it out between LEPs result in
jam-spreading rather than prioritisation of the projects that could make the
biggest difference to growth? Understanding the (national!) criteria for
allocation of the borrowing will be important to ensure that this results in
the boost to local growth intended.

Generally, there’s
some good news in the response to Heseltine, not least because some of the
measures are tackling the culture of centralisation as well as being specific
policies to change allocation of powers and funding. But the proof is always in
the implementation – and the money. Just as Heseltine’s approach was, the
response from Government is still a relatively centralised approach to
devolution and the real test will be whether this gets implemented in a way
that really does cut through Whitehall silos, whether the pot is going to be
big enough, and whether Government really does let go of some of its strings.

To help point the
way forward, we have distilled the 81 recommendations that the Government has
committed to at least partially implementing into the top ten priorities national and local
policymakers now need to focus on, including establishing a significant
Single Local Growth Fund, ensuring flexibility about the way funds are
allocated, and building on some of the most useful aspects of City Deals such
as the ability to negotiate, with constructive challenge from Government to
help local areas improve their plans.

Heseltine is a real
opportunity to make a difference to the UK economy; we need to do all we can to
ensure it is implemented in a way that makes the most of that potential.